When inventory is recognized as slow moving, everyone in the corporation wants to weigh in on the situation. Some will say “there is someone out there that wants it and will pay good money for it”… but not really. Super salesman Dave will say “let me have at it. I can sell it. I know someone”. But it is like the tire advertisements, if you don’t need tires, it doesn’t make any difference what the price is.
Generally, slow moving inventory doesn’t become slow moving because of poor inventory management. It usually happens because the end product it was designed for has aged and the field population and requirement has diminished. Today’s systems don’t track inventory demand by the population of the end product. Therefore, the system will leave you with inventory based on what has happened rather than what is happening because this demand and inventory can’t be forecasted.
Whatever the reason, you now have this inventory and a decision needs to be made. It makes your financial statements look bad; it’s taking up space in the warehouse and probably affecting corporate incentive programs. No one person wants to make the final decision, so a committee develops and studies the problem for months. And…they often never make a decision. And…the inventory just sits there costing more money, eating away at your profits!
Here are some things you don’t want to do.
Don’t let it collect dust
This is an expensive option that destroys your operating profits. Don’t let it collect dust in your high volume, high velocity distribution system and warehouse. That dust gets more expensive by the day. You investment in this inventory keeps growing because of the ongoing inventory carrying cost. You need to reduce or eliminate this hidden cost.
Don’t go to the surplus market
The surplus market will give you cents on the dollar which may seem great if you haven’t been a student of how the surplus market actually operates. If the surplus market is interested in your inventory, it is because they know more about your product than you do. They know they can buy from you at cents on the dollar, cherry pick the inventory and sell it to your distribution channels or their competitors at a discount off of dealer net. Not only does this mess up your customer image and destroy the association with your distribution channels, it often will come back to you in dealer returns.
Don’t bite the bullet and scrap the inventory
Out of frustration, lack of time and resources some companies will say “to heck with it.” After months of review by the many departments within the company, no one can agree on what can be scrapped and what should be kept. The write off will be larger than corporate wants to take, so a dollar amount is set that won’t destroy the profits, incentive programs, and the employment of some departmental managers. After all of this you haven’t resolved the long term problem. And even worse, next year it starts all over again! You end up making an even larger investment into Inventory that really just needs to be managed cost effectively.
Here is what you should do
The best practice for maximizing your return is to utilize the services of a company that is an expert in physically managing slow moving Inventory. One that will maximize your customer service level and profits, while reducing or completely eliminating your cost of keeping this Inventory available.
GPS Inventory Solutions provides a long range plan for managing excess and slow moving Inventory that will satisfy your department heads and corporate office. GPS Inventory Bank programs provide the only true long range Exit Strategy for your Inventory that is cost effective every year.
Just because an Inventory doesn’t meet your turnover and ROI objectives, it still plays an important role for the company. There is still a market in your customer base, all be it small in volume and unpredictable. For those of us who track this type of Inventory, the history shows that 50% of a slow moving Inventory will have a demand of 5-6% annually, and over time, 50% of the items will be needed for customer service requirements.
Typically this Inventory will have been depreciated over a specific time period until it is ultimately written off. When you start your depreciation process you should also start reducing your operating cost of keeping this Inventory available for the future unpredictable requirement.
GPS Inventory Solutions offers different options depending on whether you are ready to write it off or want to still retain ownership of the Inventory. Our programs take over the storage, management and distribution of these products which significantly reduces or completely eliminates your carrying costs.
Using GPS Inventory Solutions and its Inventory Bank programs will maximize your profits and enhance your customer satisfaction. Contact GPS Inventory Solutions for a FREE Inventory Analysis and customized long range management plan for your excess and slow moving Inventory.
For more information contact GPS at www.gpsinventorysolutions.com or (800) 896-0477
